The slumping dollar can expect to drop some more—a lot more, actually—according to Citigroup: some 20% next year, on top of the 4.9% it has fallen thus far this year.
Paradoxically, the chief culprit is the good news on the coronavirus vaccine front, Citi figures. That stirs hope around the world and promotes the prospect that pandemic-slammed economies across the map will recover. So overseas investors have less need to seek refuge in US assets, which always boosts the greenback.
“Vaccine distribution, we believe, will check off all of our bear market signposts, allowing the dollar to follow a similar path to that it experienced from the early to mid-2000s” when the currency last had a major downturn, Calvin Tse and other Citi strategists wrote in a report.
Indeed, earlier this year, when markets fell globally and economic growth cratered, there was a rush into dollar-denominated securities….